Rio Tinto to charge more for iron ore, thanks to China

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Rio Tinto has put its iron ore customers on notice that it is looking for another big price increase for shipments from its Pilbara mines in 2005-06, indicating that it believes the good times brought on by the China boom will roll on.

The group also hosed down speculation that it was about to dump its 14 per cent stake in Papua New Guinean goldminer Lihir Gold and its 68 per cent interest in Ranger uranium miner Energy Resources of Australia.

"It's a similar market position to what we saw a year ago," Mr Clifford said after speaking to a record crowd of 560 at a Melbourne Mining Club luncheon at the Town Hall.

His short and sharp comment was taken as a guide for a rise in the upcoming price negotiations that at least matches the 18.6 per cent price (US dollar) increase secured for 2004-05.

The gain for 2004-05 shipments compared with the 9 per cent rise secured for 2003-04, the first year it became apparent that the Chinese steel industry was experiencing unprecedented growth.

Assuming the US exchange rate levels off, a price increase matching last year's would deliver Rio and the other Pilbara producer, BHP Billiton, boom-time profits from their fast expanding operations.

It is a position that both would like to protect from competition, with Mr Clifford following up last week's attack on the Pilbara iron ore ambitions of Andrew Forrest's Fortescue Metals Group with plenty of subtle barbs in yesterday's speech.

"Sustainable success in an enterprise of this kind [Pilbara iron ore] is the result of planning decades ahead. You cannot explore in January to satisfy a customer in December," he said.

On speculation that Rio Tinto's interests in Lihir and ERA would become part of its garage sale of non-core assets, Mr Clifford said the company was "comfortable where we are" on both counts.

He confessed that ERA had "pretty unsatisfactory operational issues" it was working through.

But it was exposed to the strong demand for uranium, with prices taking off in response to the rundown in stockpiles and the material available from the conversion of weapons grade material.

Mr Clifford said nuclear energy was going to play a part in fuelling the China boom.

It was expected the country would need to add the equivalent of the UK's entire electricity generation capacity year after year.

Mr Clifford repeated Rio's usual cautionary note on China, saying that "speed bumps" in its economic growth should be expected and that it would not be a surprise if the bumps were sometimes severe.

"However, be in no doubt: China's forward momentum will continue and the effect on our industry will be dramatic. Demographics will see to that," Mr Clifford said.